Although China's banking industry has made significant progress
in reform and opening up to the outside world contradictions like
unbalanced development remained clear, according to Vice Chairman
of the China Banking Regulatory Commission (CBRC) Tang Shuangning.
Tang made the remarks during his speech at the opening ceremony of
the 21st Century Asian Financial Year held in Beijing on November
25.
Through reform and opening up to the outside world, the number
of Chinese banks attaining the required standards of adequate
capital had increased to 66 by the end of this September from eight
at the end of 2003, according to CBRC.
Bad loan balance and ratio have both dropped, non-performing
loan provisioning coverage ratio has increased by a big margin and
average capital profit ratio has reached 9.41 percent. The
Industrial and Commercial Bank of China, the Bank of China and the
China Construction Bank have entered the ranks of the world's top
10 big banks. "The achievement is hard-earned and remarkable," Tang
said.
While making historical progress in reform and development,
China's banking industry was facing five big challenges. Tang
described them.
Competition: December 11, 2006 will mark the
end of the transitional period since China joined the World Trade
Organization five years ago. Foreign banks will enjoy national
treatment by then. While introducing advanced management experience
to the Chinese banking industry, they'll at the same time "get down
to brass tacks" to launch direct competition with domestic banks in
seeking out high-grade consumers, retail industry customers and
opportunities in coastal areas by taking advantage of their own
advanced management technology. "Chinese banks must be all set for
the competition," Tang said.
Management: Even carrying out shareholding
reforms, some Chinese banks still haven't formed completely
effective management, scientific stipulation and capital risk
restraint mechanisms. Divisions of responsibilities, rights and
interests still required to be standardized. "These may become the
'soft rib' to some Chinese banks," Tang predicted.
Risk: Chinese banks' management capabilities on
financial risk remain to be strengthened, especially their
discernment or monitoring and controlling capabilities to market
and operational risks as they've just started in this area of
business. "They must attach great importance to the problem," Tang
warned.
Renovation: There's still a big gap in
financial creative capabilities and service standards between
Chinese banks and their foreign counterparts, Tang said. Chinese
banks were comparatively weak in pricing risks and managing
information. The poor quality of Chinese administrative staff meant
it was difficult to meet creative and competitive requirements.
"The contradictions and problems remain to be solved," Tang
said.
Credit: The outside environment for the
existence and development of Chinese banks awaited further
improvement. It included surplus mobility of capitals, great
pressure on profit making, limited channels for poor asset
handling, lack of independent rights to cancel bad loans after
verification and weaknesses in the sense of social credit.
"Different banks have different behaviors in handling the problems
so the reform of the Chinese banking industry must advance in
classification," Tang added.
(Xinhua News Agency, translated by Li Jingrong for China.org.cn,
November 29, 2006)